R&D; Budgets to Stay Flat in 1992

Spending on research and development in the United States is likely to remain almost flat next year as a result of falling corporate profits and the federal government’s budget squeeze, according to a new study from an Ohio research organization.

Research budgets are often vulnerable in tight economic times, but a drop-off in R&D; spending could damage the long-term competitiveness of American industry--especially since big Japanese technology companies are better equipped to ride out a slowdown without major cutbacks.

In its annual R&D; forecast, the Battelle research institute says corporate R&D; spending will rise 3.2% next year, to $80.5 billion, and government spending will be up 2.4%, to $67.6 billion. With research expenses rising 2%, the real increase in R&D; will be less than 1%, far below the 3.3% average annual increases of the past decade, according to Battelle.

“The increase (in annual R&D; spending) has been getting smaller and smaller for the past four years,” said Jules L. Duga, senior R&D; policy analyst at Battelle and principal author of the report. He predicted that trend would continue--possibly yielding a net decline in R&D; expenditures within the next several years--before turning around in the mid-1990s.

Many companies are holding the line on R&D; spending as a result of the recession. International Business Machines, for example, which spends more than $6 billion annually on R&D;, has said spending in this area will be flat this year, next year and the year after.

Duga said there was a shift under way in the orientation of corporate R&D;, with more money focused on short-term projects that promise immediate returns and less devoted to basic science. In addition, he said, companies are stepping up their efforts to measure the effectiveness of R&D.;

“Industry managers are caught between two types of pressures,” Duga said. “On one hand, they realize R&D; is not a direct revenue-producing activity and is usually a candidate for short-term curtailment. Yet they know R&D; investment is necessary for long-term profit and survival.”

While he deplored the tendency of American business to focus on short-term financial results, he said overall R&D; spending remained at a healthy level, and that more effort needed to be devoted to taking advantage of R&D; results.

On the government side, the Battelle study notes that defense R&D--which; remains by far the largest component of the government research effort--was less affected by the end of the Cold War than other military programs. Still, military R&D; will rise only slightly--from $53.7 billion this year to $54.3 billion in 1992--and remain well below the $57 billion spent in 1990.

Although the Bush Administration’s budget had proposed boosting federal R&D; to $71 billion, Battelle predicted that only $67.6 billion of that spending would ultimately be approved. The study projected that NASA, the space agency, will get the biggest increase, from $10.8 billion to $12.6 billion.